Despite record high gold prices, experts still advise buying

Mr. Robert Minter - Director of ETF strategy commented that investors should ignore the potential fluctuations of the market in the short term. He said that they should focus on the big picture including the interest rate trending down.

Lower interest rates and persistent inflationary pressures mean real interest rates could fall faster than expected. “In this case, investors should focus on commodities, with a specific allocation to gold,” Robert Minter stressed.

However, many investors still choose to stay on the sidelines. According to Robert Minter, this is one of the biggest factors that increases the price of gold and supports the price of the precious metal in the long term.

Institutional and retail investors have become liquidity providers throughout 2023 and most of 2024, selling their ETFs (exchange-traded funds backed by gold), Minter said, adding that the market could absorb the excess liquidity because central banks have been buying on an unprecedented basis.

While central bank demand has slowed, investor appetite is starting to shift. Gold-backed ETFs have seen sausagey inflows this year.

Investors are starting to look at gold because they want to protect their purchasing power against rising inflation, according to Mr. Minter.

Meanwhile, rising debt and consumer prices will continue to support gold prices in the last two months of the year and into 2025. At the same time, the precious metal will not only be an inflation hedge.

Another factor that makes Mr. Minter more optimistic about gold prices is the news surrounding the US presidential election. Uncertainty about the outcome of the upcoming election and the possibility of more fiscal stimulus are the main ingredients driving gold prices higher.

Looking to the end of the year, Minter said gold could trade around $2,800 an ounce. “If interest rates are cut as the bond market is pricing in and rates fall 200 basis points next year, it is not unrealistic to see gold hitting $3,000 an ounce,” said Robert Minter.

Sharing the same view, Mr. Ole Hansen - Head of Commodity Strategy (Saxo Bank) said that the US Presidential election is affecting the market momentum. The expert said that gold is still an attractive choice to hedge against risks ahead of the US election.

"Regardless of the election outcome, concerns about continued US debt growth will also provide a boost to gold," said Ole Hansen.